Saturday, January 17, 2009

Peter Beinart: The Surge Worked

Admit It: The Surge Worked. By Peter Beinart
WaPo, Sunday, January 18, 2009; page B07

It's no longer a close call: President Bush was right about the surge. According to Michael O'Hanlon and Jason Campbell of the Brookings Institution, the number of Iraqi war dead was 500 in November of 2008, compared with 3,475 in November of 2006. That same month, 69 Americans died in Iraq; in November 2008, 12 did.

Violence in Anbar province is down more than 90 percent over the past two years, the New York Times reports. Returning to Iraq after long absences, respected journalists Anthony Shadid and Dexter Filkins say they barely recognize the place.

Is the surge solely responsible for the turnaround? Of course not. Al-Qaeda alienated the Sunni tribes; Moqtada al-Sadr's Mahdi Army decided to stand down; the United States assassinated key insurgent and militia leaders, all of which mattered as much if not more than the increase in U.S. troops. And the decline in violence isn't necessarily permanent. Iraq watchers warn that communal distrust remains high; if someone strikes a match, civil war could again rage out of control.

Moreover, even if the calm endures, that still doesn't justify the Bush administration's initial decision to go to war, which remains one of the great blunders in American foreign policy history. But if Iraq overall represents a massive stain on Bush's record, his decision to increase America's troop presence in late 2006 now looks like his finest hour. Given the mood in Washington and the country as a whole, it would have been far easier to do the opposite. Politically, Bush took the path of most resistance. He endured an avalanche of scorn, and now he has been vindicated. He was not only right; he was courageous.

It's time for Democrats to say so. During the campaign they rarely did for fear of jeopardizing Barack Obama's chances of winning the presidency. But today, the hesitation is less tactical than emotional. Most Democrats think Bush has been an atrocious president, and they want to usher him out of office with the jeers he so richly deserves. Even if they suspect, in their heart of hearts, that he was right about the surge, they don't want to give him the satisfaction.

Yet they should -- not for his sake but for their own. Because Bush has been such an unusually bad president, an entire generation of Democrats now takes it for granted that on the big questions, the right is always wrong. Older liberals remember the Persian Gulf War, which most congressional Democrats opposed and most congressional Republicans supported -- and the Republicans were proven right. They also remember the welfare reform debate of the mid-1990s, when prominent liberals predicted disaster, and disaster didn't happen.

Younger liberals, by contrast, have had no such chastening experiences. Watching the Bush administration flit from disaster to disaster, they have grown increasingly dismissive of conservatives in the process. They consume partisan media, where Republican malevolence is taken for granted. They laugh along with the "Colbert Report," the whole premise of which is that conservatives are bombastic, chauvinistic and dumb. They have never had the ideologically humbling experience of watching the people whose politics they loathe be proven right.

In this way, they are a little like the Bushies themselves. One reason the Bush administration fell prey to such monumental hubris was that it didn't take its critics seriously. Convinced that the Reagan years had forever vindicated deregulated capitalism and unfettered American might, the Bushies blithely dismissed liberals who warned about deregulation, or Europeans who warned about military force, on the grounds that history had consistently proved those critics wrong. "You want to know what I really think of the Europeans?" a top Bush official declared during the Iraq debate. "I think they have been wrong on just about every major international issue for the past 20 years."

Today, by contrast, it is conservatives who have been proven wrong again and again. Politically and intellectually, the right is discredited, and the arguments of its rump minority in Congress will be easy to dismiss. Liberal self-confidence is sky-high.

That's why it's important to admit that Bush was right about the surge. Doing so would remind Democrats that no one political party, or ideological perspective, has a monopoly on wisdom. That recognition can be the difference between ambition -- which the Obama presidency must exhibit -- and hubris, which it can ill afford.

Being proven right too many times is dangerous. It breeds intellectual arrogance and complacency. As the Democrats prepare to take over Washington, they should publicly acknowledge that on the surge, they were wrong. That acknowledgment may not do much for Bush's legacy, but it could do wonders for their own.

Peter Beinart, a senior fellow at the Council on Foreign Relations, writes a monthly column for The Post.

North Korea Says It Has ‘Weaponized’ Plutonium

North Korea Says It Has ‘Weaponized’ Plutonium, by Choe Sang-Hun
TNYT, January 18, 2009

SEOUL, South Korea — The North Korean military declared an “all-out confrontational posture” against South Korea on Saturday as an American scholar said he had been told by North Korean officials that the North had “weaponized” 30.8 kilograms of plutonium, enough for four to six nuclear bombs.

That claim would confirm American intelligence estimates, which suggest that the North has harvested the fuel for six or more bombs.

South Korea ordered its military to heighten vigilance along the heavily fortified border with North Korea, said a spokesman of the South Korean military joint chiefs of staff.

North Korea’s saber-rattling rhetoric against the South has increased in intensity since President Lee Myung-bak came to office in Seoul a year ago, vowing to take a tougher stance on North Korea, reversing 10 years of his liberal predecessors’ efforts to engage the North with economic aid. But what made the threat on Saturday unusual — and more worrisome to some South Korean analysts — was the way it was delivered: in a statement read on North Korean television by a uniformed spokesman for the North Korean military joint chiefs of staff.

“Strong military measures will follow from our revolutionary armed force,” the spokesman, a colonel, said, according to Yonhap, South Korea’s national news agency, which monitors North Korean broadcasts.

Usually the North Korean government issues written statements that are delivered by North Korean media; sometimes the statements are read by press officers, not by a uniformed member of the military.

The spokesman he warned of a clash along a disputed western sea border between the Koreas. The two navies fought skirmishes there in 1999 and 2002. It is always difficult to decipher the messages that North Korea’s reclusive government is trying to send with its often bombastic missives. In times of crucial bargaining, North Korea often tries to drive a wedge between Washington and South Korea to sow discord between the allies, and raises the stakes by increasing demands and issuing dire threats.

With President-elect Barack Obama about to take office in the United States and negotiations over the North’s nuclear program expected to resume, it is possible that the North is merely setting up its negotiating position. But analysts said it could also be an indication that North Korea was intending to hold on to its arms despite an agreement it signed with five countries, including the United States, in 2005, in which it committed to eventually giving up those weapons. The exact conditions under which it would do so were unclear.

Questions over the health of the country’s quixotic leader, Kim Jong-il, also complicate any attempts to understand the country, where few Westerners have access. In August, there were reports that Mr. Kim suffered a stroke, and since then rumors have swirled about who might succeed him.

The news about the possible weaponization of North Korea’s stores of plutonium were delivered Saturday by the American scholar, Selig S. Harrison, the director of the Asia program at the Center for International Policy, who was in Beijing after returning from the North Korean capital, Pyongyang.

Mr. Harrison, said that when pressed, the North Korean officials did not explicitly say what “weaponization” of the plutonium meant, but that the implication was that North Korea had created nuclear bombs with the plutonium.

Mr. Harrison, a former journalist, often travels to North Korea to meet with senior officials there.

“They’ve raised the bar and said, ‘We are a nuclear weapons state and deal with us on that basis,’ ” said Mr. Harrison at a news conference in the St. Regis Hotel in Beijing.

Mr. Harrison acknowledged that North Korea could be bluffing in order to use the claim of having nuclear weapons as a negotiating tactic.

He added that all the officials he met with seemed eager to open discussions with the incoming Obama administration. “All the statements about Obama were very helpful, very respectful,” he said.

Thirty kilograms of plutonium, about 66 pounds, which would account for most of the 37 kilograms North Korea declared that it possessed to the United States last year, is enough for it to make four to six bombs, according to nuclear experts.

South Korea had no immediate reaction to Mr. Harrison’s report.

Earlier Saturday, North Korea also toughened its stance toward Washington, saying that reopening diplomatic ties would not be enough to persuade it to give up its nuclear weapons. It said it would maintain its “status as a nuclear weapons state” as long as there was a nuclear threat from the United States.

“We can live without normalizing ties with the United States, but we cannot live without a nuclear deterrent,” a spokesman for North Korea’s Foreign Ministry told its official news agency, KCNA.

In the past, the North had said it would not dismantle the weapons until the United States changed what it termed its “hostile attitude.”

In the spokesman’s comments, and his similar statement last Tuesday, North Korea laid out its demands as it prepared for a new series of negotiations with Mr. Obama, who will be inaugurated on Tuesday.

Its stance posed the hard question to the new Obama administration of what it would take to remove North Korea’s nuclear weapons assets.

In its Tuesday statement, North Korea indicated that the removal of an American nuclear threat meant the removal of South Korea from the American nuclear umbrella, the introduction of a verification mechanism to ensure that no American atomic weapons are deployed in or pass through South Korea, and even simultaneous nuclear disarmament talks among “all nuclear states,” including itself.

Six-nation talks on ending North Korea’s nuclear programs, which include the United States, stalled in the last months of the Bush administration as the United States and North Korea bickered over how much nuclear inspection the North should accept.

Edward Wong contributed reporting from Beijing.

Remarks of President-Elect Barack Obama: Our democratic tradition

Remarks of President-Elect Barack Obama: Our democratic tradition
Radio Address on Inauguration Week
January 17, 2009

Good morning. On Tuesday, the world will be watching as America celebrates a rite that goes to the heart of our greatness as a nation. For the forty-third time, we will execute the peaceful transfer of power from one President to the next.

The first Inauguration took place 220 years ago. Our nation’s capital had yet to be built, so President George Washington took the oath of office in New York City. It was a spring day, just over a decade after the birth of our nation, as Washington assumed the new office that he would do so much to shape, and swore an oath to the Constitution that guides us to this very day.

Since then, Inaugurations have taken place during times of war and peace; in Depression and prosperity. Our democracy has undergone many changes, and our people have taken many steps in pursuit of a more perfect union. What has always endured is this peaceful and orderly transition of power.

For us, it is easy to take this central aspect of our democracy for granted. But we must remember that our nation was founded at a time of Kings and Queens, and even today billions of people around the world cannot imagine their leaders giving up power without strife or bloodshed.

Through the ages, many have struggled for the right to live in a land where power does not belong to one person or party, and many brave Americans have fought and died to help advance that right. Through the long twilight struggle of the Cold War, our transitions from one President to the next provided a stark contrast to the suffocating grip of Soviet Communism. And today, the resilience of our democracy stands in opposition to the extremists who would tear it down.

Here at home, transitions also remind us that what we hold in common as Americans far outweighs our political differences. Throughout the current transition, President Bush and his Administration have extended the hand of cooperation, and provided invaluable assistance to my team as we prepare to hit the ground running on January 20th.

There is much work to be done. But now, all Americans hold within our hands the promise of a new beginning.

That is why the events of the next several days are not simply about the inauguration of an American President – they will be a celebration of the American people. We will carry the voices of ordinary Americans to Washington. We will invite people across the country to work on behalf of a common purpose through a national day of service on Monday. And we will have the most open and accessible Inauguration in history – for those who travel to the capital, and for those who choose one of the many ways to participate in the Inauguration from their own communities and their own homes.

Together, we know that this is a time of great challenge for the American people. Difficult days are upon us, and even more difficult days lie ahead. Our nation is at war. Our economy is in great turmoil. And there is so much work that must be done to restore peace and advance prosperity. But as we approach this time-honored American tradition, we are reminded that our challenges can be met if we summon the spirit that has sustained our democracy since George Washington took the first oath of office.

Addressing the nation that day, Washington explained his decision to serve, saying, “I was called by my country, whose voice I can never hear but with veneration and love.” This Tuesday, we can reaffirm our own veneration and love for our country and our democracy. We can once again provide an example to the world, and move forward with a renewed sense of purpose and progress at home.

Thanks.

To Implement the US-Peru Trade Promotion Agreement and for Other Purposes, 2009

To Implement the United States-Peru Trade Promotion Agreement and for Other Purposes, 2009
A Proclamation by the President of the United States of America
Washington, DC, Jan 16, 2009

1. On April 12, 2006, the United States entered into the United States-Peru Trade Promotion Agreement (the "Agreement"), and on June 24 and June 25, 2007, the Parties to the Agreement signed a protocol amending the Agreement. Congress approved the Agreement as amended in section 101(a) of the United States-Peru Trade Promotion Agreement Implementation Act (the "Implementation Act") (Public Law 110-138, 121 Stat. 1455) (19 U.S.C. 3805 note).

2. Section 105(a) of the Implementation Act authorizes the President to establish or designate within the Department of Commerce an office that shall be responsible for providing administrative assistance to panels established under chapter 21 of the Agreement.

3. Section 201 of the Implementation Act authorizes the President to proclaim such modifications or continuation of any duty, such continuation of duty-free or excise treatment, or such additional duties, as the President determines to be necessary or appropriate to carry out or apply Articles 2.3, 2.5, 2.6, 3.3.13 and Annex 2.3 of the Agreement.

4. Section 201(d) of the Implementation Act authorizes the President to take such action as may be necessary in implementing the tariff-rate quotas set forth in Appendix I to the Schedule of the United States to Annex 2.3 of the Agreement to ensure that imports of agricultural goods do not disrupt the orderly marketing of commodities in the United States.

5. Consistent with section 201(a)(2) of the Implementation Act, Peru is to be removed from the enumeration of designated beneficiary developing countries eligible for the benefits of the Generalized System of Preferences (GSP) on the date the Agreement enters into force. Further, consistent with section 604 of the Trade Act of 1974, as amended (the "1974 Act") (19 U.S.C. 2483), I have determined that other technical and conforming changes to the Harmonized Tariff Schedule of the United States (HTS) are necessary to reflect that Peru is no longer eligible to receive the benefits of the GSP.

6. Section 203 of the Implementation Act sets forth certain rules for determining whether a good is an originating good for the purpose of implementing preferential tariff treatment provided for under the Agreement. I have decided that it is necessary to include these rules of origin, together with particular rules applicable to certain other goods, in the HTS.

7. Section 203(o) of the Implementation Act authorizes the President to determine that a fabric, yarn, or fiber is or is not available in commercial quantities in a timely manner in the United States and Peru; to establish procedures governing the request for any such determination and ensuring appropriate public participation in any such determination; to add any fabric, yarn, or fiber determined to be not available in commercial quantities in a timely manner in the United States and Peru to the list in Annex 3-B of the Agreement in a restricted or unrestricted quantity; to eliminate a restriction on the quantity of a fabric, yarn, or fiber within 6 months after adding the fabric, yarn, or fiber to the list in Annex 3-B of the Agreement in a restricted quantity; and to restrict the quantity of, or remove from the list in Annex 3-B of the Agreement, certain fabrics, yarns, or fibers.

8. Section 208 of the Implementation Act authorizes the President to take certain enforcement actions relating to trade with Peru in textile and apparel goods.

9. Subtitle B of title III of the Implementation Act authorizes the President to take certain actions in response to a request by an interested party for relief from serious damage or actual threat thereof to a domestic industry producing certain textile or apparel articles.

10. Executive Order 11651 of March 3, 1972, as amended, established the Committee for the Implementation of Textile Agreements (CITA), consisting of representatives of the Departments of State, the Treasury, Commerce, and Labor, and the Office of the United States Trade Representative, with the representative of the Department of Commerce as Chairman, to supervise the implementation of textile trade agreements. Consistent with section 301 of title 3, United States Code, when carrying out functions vested in the President by statute and assigned by the President to CITA, the officials collectively exercising those functions are all to be officers required to be appointed by the President with the advice and consent of the Senate.

11. Presidential Proclamation 7971 of December 22, 2005, implemented the United States-Morocco Free Trade Agreement (USMFTA). The proclamation implemented, pursuant to section 201 of the United States-Morocco Free Trade Agreement Implementation Act (the "USMFTA Act") (Public Law 108-302, 118 Stat. 1103) (19 U.S.C. 3805 note), the staged reductions in rates of duty that I determined to be necessary or appropriate to carry out or apply certain provisions of the USMFTA, including Articles 2.5 and 2.6. The proclamation inadvertently omitted two modifications to the HTS necessary to carry out the provisions of Articles 2.5 and 2.6 of the USMFTA. I have determined that technical corrections to the HTS are necessary to provide the intended tariff treatment under Articles 2.5 and 2.6 of the USMFTA.

12. Presidential Proclamation 8039 of July 27, 2006, implemented the United States-Bahrain Free Trade Agreement (USBFTA). The proclamation implemented, pursuant to section 201 of the United State-Bahrain Free Trade Agreement Implementation Act (the "USBFTA Act") (Public Law 109-169, 119 Stat. 3581), the staged reductions in rates of duty that I determined to be necessary or appropriate to carry out or apply certain provisions of the USBFTA, including Articles 2.5 and 2.6. The proclamation inadvertently omitted two modifications to the HTS necessary to carry out the provisions of Articles 2.5 and 2.6 of the USBFTA. I have determined that technical corrections to the HTS are necessary to provide the intended tariff treatment under Articles 2.5 and 2.6 of the USBFTA.

13. Presidential Proclamation 8331 of December 23, 2008, implemented the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) for trade with Costa Rica. The proclamation implemented, pursuant to section 201 of the Dominican Republic-Central America-United States Free Trade Agreement Implementation Act (the "CAFTA-DR Act") (Public Law 109-53, 119 Stat. 467) (19 U.S.C. 4031), the duty treatment necessary to carry out or apply Articles 3.3 and 3.27, and Annexes 3.3 (including the schedule of United States duty reductions with respect to originating goods) and 3.27, of the CAFTA-DR. I have determined that technical corrections to the HTS are necessary to provide the intended duty treatment under the CAFTA-DR.

14. Section 604 of the 1974 Act, as amended, authorizes the President to embody in the HTS the substance of relevant provisions of that Act, or other Acts affecting import treatment, and of actions taken thereunder, including the removal, modification, continuance, or imposition of any rate of duty or other import restriction.

NOW, THEREFORE, I, GEORGE W. BUSH, President of the United States of America, acting under the authority vested in me by the Constitution and the laws of the United States of America, including but not limited to section 604 of the 1974 Act; sections 105(a), 201, 203, 208, and subtitle B of title III of the Implementation Act; and section 301 of title 3, United States Code, and having made the determination under section 101(b) of the Implementation Act necessary for the exchange of notes, do hereby proclaim:

(1) In order to provide generally for the preferential tariff treatment being accorded under the Agreement, to set forth rules for determining whether goods imported into the customs territory of the United States are eligible for preferential tariff treatment under the Agreement, to provide certain other treatment to originating goods of Peru for the purposes of the Agreement, to provide tariff-rate quotas with respect to certain originating goods of Peru, to reflect Peru's removal from the enumeration of designated beneficiary developing countries for purposes of the GSP, and to make technical and conforming changes in the general notes to the HTS, the HTS is modified as set forth in Annex I of Publication 4058 of the United States International Trade Commission, entitled, "Modifications to the Harmonized Tariff Schedule of the United States to Implement the United States-Peru Trade Promotion Agreement", which is incorporated by reference into this proclamation.

(2) In order to implement the initial stage of duty elimination provided for in the Agreement and to provide for future staged reductions in duties for originating goods of Peru for purposes of the Agreement, the HTS is modified as provided in Annex II of Publication 4058, effective on the dates specified in the relevant sections of such publication and on any subsequent dates set forth for such duty reductions in that publication.

(3) The amendments to the HTS made by paragraphs (1) and (2) of this proclamation shall be effective with respect to goods entered, or withdrawn from warehouse for consumption, on or after the relevant dates indicated in Annex II to Publication 4058.

(4) The Secretary of Commerce is authorized to exercise my authority under section 105(a) of the Implementation Act to establish or designate an office within the Department of Commerce to carry out the functions set forth in that section.

(5) The United States Trade Representative (USTR) is authorized to exercise my authority under section 201(d) of the Implementation Act to take such action as may be necessary in implementing the tariff-rate quotas set forth in Appendix I to the Schedule of the United States to Annex 2.3 of the Agreement to ensure that imports of agricultural goods do not disrupt the orderly marketing of commodities in the United States. This action is set forth in Annex I of Publication 4058.

(6) The CITA is authorized to exercise my authority under section 203(o) of the Implementation Act to determine that a fabric, yarn, or fiber is or is not available in commercial quantities in a timely manner in the United States and Peru; to establish procedures governing the request for any such determination and ensuring appropriate public participation in any such determination; to add any fabric, yarn, or fiber determined to be not available in commercial quantities in a timely manner in the United States and Peru to the list in Annex 3-B of the Agreement in a restricted or unrestricted quantity; to eliminate a restriction on the quantity of a fabric, yarn, or fiber within 6 months after adding the fabric, yarn, or fiber to the list in Annex 3-B of the Agreement in a restricted quantity; and to restrict the quantity of, or remove from the list in Annex 3-B of the Agreement, certain fabrics, yarns, or fibers.

(7) The CITA is authorized to exercise my authority under section 208 of the Implementation Act to exclude certain textile and apparel goods from the customs territory of the United States; to determine whether an enterprise's production of, and capability to produce, goods are consistent with statements by the enterprise; to find that an enterprise has knowingly or willfully engaged in circumvention; and to deny preferential tariff treatment to textile and apparel goods.

(8) The CITA is authorized to exercise the functions of the President under subtitle B of title III of the Implementation Act to review requests, and to determine whether to commence consideration of such requests; to cause to be published in the Federal Register a notice of commencement of consideration of a request and notice seeking public comment; to determine whether imports of a Peruvian textile or apparel article are causing serious damage, or actual threat thereof, to a domestic industry producing an article that is like, or directly competitive with, the imported article; and to provide relief from imports of an article that is the subject of such a determination.

(9) The CITA, after consultation with the Commissioner of Customs (the "Commissioner"), is authorized to consult with representatives of Peru for the purpose of identifying particular textile or apparel goods of Peru that are mutually agreed to be handloomed fabrics, handmade goods made of such handloomed fabrics, folklore goods, or handmade goods that substantially incorporate a historical or traditional regional design or motif, as provided in Article 3.3.12 of the Agreement. The Commissioner shall take actions as directed by the CITA to carry out any such determination.

(10) The USTR is authorized to fulfill my obligations under section 104 of the Implementation Act to obtain advice from the appropriate advisory committees and the United States International Trade Commission on the proposed implementation of an action by presidential proclamation; to submit a report on such proposed action to the appropriate congressional committees; and to consult with those congressional committees regarding the proposed action.

(11) The USTR is authorized to modify U.S. note 29 to subchapter XXII of chapter 98 of the HTS in a notice published in the Federal Register to reflect modifications pursuant to paragraph (6) of this proclamation by the CITA to the list of fabrics, yarns, or fibers in Annex 3-B of the Agreement.

(12) In order to make technical corrections necessary to provide the intended duty treatment under Articles 2.5 and 2.6 of the USMFTA, Articles 2.5 and 2.6 of the USBFTA, and the CAFTA-DR, the HTS is modified as set forth in Annex III of Publication 4058.

(13) All provisions of previous proclamations and Executive Orders that are inconsistent with the actions taken in this proclamation are superseded to the extent of such inconsistency.

IN WITNESS WHEREOF, I have hereunto set my hand this sixteenth day of January, in the year of our Lord two thousand nine, and of the Independence of the United States of America the two hundred and thirty-third.

GEORGE W. BUSH

To Suspend Entry as Immigrants and Nonimmigrants of Foreign Government Officials Responsible for Failing to Combat Trafficking in Persons

To Suspend Entry as Immigrants and Nonimmigrants of Foreign Government Officials Responsible for Failing to Combat Trafficking in Persons
A Proclamation by the President of the United States of America
Washington, DC, Jan 16, 2009

In order to foster greater resolve to address trafficking in persons (TIP), specifically in punishing acts of trafficking and providing protections to the victims of these crimes, consistent with the Trafficking Victims Protection Act of 2000, as amended (the "Act") (22 U.S.C. 7101 et seq.), it is in the interests of the United States to restrict the international travel and to suspend entry into the United States, as immigrants or nonimmigrants, of certain senior government officials responsible for domestic law enforcement, justice, or labor affairs who have impeded their governments' antitrafficking efforts, have failed to implement their governments' antitrafficking laws and policies, or who otherwise bear responsibility for their governments' failures to take steps recognized internationally as appropriate to combat trafficking in persons, and whose governments have been ranked more than once as Tier 3 countries, which represent the worst anti-TIP performers, in the Department of State's annual Trafficking in Persons Report, and for which I have made a determination pursuant to section 110(d)(1)-(2) or (4) of the Act. The Act reflects international antitrafficking standards that guide efforts to eradicate this modern-day form of slavery around the world.

NOW, THEREFORE, I, GEORGE W. BUSH, President of the United States of America, by virtue of the authority vested in me by the Constitution and the laws of the United States, including section 212(f) of the Immigration and Nationality Act of 1952, 8 U.S.C. 1182(f), and section 301 of title 3, United States Code, hereby find that the unrestricted immigrant and nonimmigrant entry into the United States of persons described in section 1 of this proclamation would, except as provided for in sections 2 and 3 of this proclamation, be detrimental to the interests of the United States.

I therefore hereby proclaim that:

Section 1. The entry into the United States, as immigrants or nonimmigrants, of the following aliens is hereby suspended:

(a) Senior government officials -- defined as the heads of ministries or agencies and officials occupying positions within the two bureaucratic levels below those top positions -- responsible for domestic law enforcement, justice, or labor affairs who have impeded their governments' antitrafficking efforts, have failed to implement their governments' antitrafficking laws and policies, or who otherwise bear responsibility for their governments' failures to take steps recognized internationally as appropriate to combat trafficking in persons, and who are members of governments for which I have made a determination pursuant to section 110(d)(1)-(2) or (4) of the Act, in the current year and at least once in the preceding 3 years;

(b) The spouses of persons described in subsection (a) of this section.

Sec. 2. Section 1 of this proclamation shall not apply with respect to any person otherwise covered by section 1 where entry of such person would not be contrary to the interest of the United States.

Sec. 3. Persons covered by sections 1 or 2 of this proclamation shall be identified by the Secretary of State or the Secretary's designee, in his or her sole discretion, pursuant to such procedures as the Secretary may establish under section 5 of this proclamation.

Sec. 4. Nothing in this proclamation shall be construed to derogate from United States Government obligations under applicable international agreements.

Sec. 5. The Secretary of State shall implement this proclamation pursuant to such procedures as the Secretary, in consultation with the Secretary of Homeland Security, may establish.

Sec. 6. This proclamation is effective immediately. It shall remain in effect until such time as the Secretary of State determines that it is no longer necessary and should be terminated, either in whole or in part. Any such determination by the Secretary of State shall be published in the Federal Register.

Sec. 7. This proclamation is not intended to, and does not, create any right, benefit, or privilege, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, instrumentalities, or entities, its officers or employees, or any other person.

IN WITNESS WHEREOF, I have hereunto set my hand this sixteenth day of January, in the year of our Lord two thousand nine, and of the Independence of the United States of America the two hundred and thirty-third.
GEORGE W. BUSH

History of Double Standards: Clinton Touted as Sturdy-Jawed Icon; Bush's Speech Paired with Funeral

Media Mudballs Unlikely for Obama Inaugural. By Rich Noyes, MRC Research Director
History of Double Standards: Clinton Touted as Sturdy-Jawed Icon; Bush's Speech Paired with Funeral.
Media Research Center, January 15, 2009

The news media are giddy with excitement as Barack Obama's Inauguration Day approaches -- CNN's Jim Acosta on Tuesday's American Morning touted how "Obama has some big shoes to fill, roughly the size of the ones up on the Lincoln Memorial....Barack Obama's inaugural address may be more than the speech of his lifetime. Historians and speechwriters say it could be one for the ages."

But it would be a mistake to think reporters are always so worshipful of new presidents. While most presidents do start with a media honeymoon, a review of the past 20 years finds reporters are more celebratory when Democrats are taking over the White House, while coverage of GOP inaugurals has included a fair number of anti-conservative stinkbombs:

# 1989. TV reporters chose to salute the incoming President George Bush by slamming the more conservative Ronald Reagan. ABC's Richard Threlkeld went to Overtown, a riot-scarred area of Miami, for Inauguration Day: "After eight years of what many saw as the Reagan administration's benign neglect of the poor and studied indifference to civil rights, a lot of those who lived through this week in Overtown seemed to think the best thing about George Bush is that he is not Ronald Reagan," Threlkeld claimed on the January 20, 1989 World News Tonight. "There is an Overtown in every big city in America -- pockets of misery made even meaner and more desperate the past eight years."

On NBC, anchor Bryant Gumbel praised Bush's speech as signaling "a new activism, a new engagement in the lives of others, a yearning for greater tolerance....Basically a rejection of everything that the Reagan years had been about."

# 1993. Bill Clinton's arrival was touted with the same fervor now bestowed on Obama. The New York Times asked in a January 3, 1993 headline: "Clinton as National Idol: Can the Honeymoon Last?" Newsweek magazine ran TV ads touting its commemorative edition "that's sure to be a collector's item because it covers the most important inauguration of our lifetime." Wall Street Journal reporter Jill Abramson -- now managing editor of news at the New York Times -- confessed: "It's an exciting time to be in Washington....People are excited. They're happy about change....I think you're going to see crowds for these inaugural events the likes of which we haven't seen in Washington ever."

# 1997. Clinton's second inaugural inspired just as much hero-worship. Howard Rosenberg reviewed Clinton's speech for the Los Angeles Times: "His sturdy jaw precedes him. He smiles from sea to shining sea. Is this President a candidate for Mt. Rushmore or what?...In fact, when it comes to influencing the public, a single medley of expressions from Clinton may be worth much more, to much of America, than every ugly accusation Paula Jones can muster."

# 2001. After the long recount, reporters applied an asterisk to Bush's first inaugural. NBC's Maria Shriver emphasized "millions of people who felt disenfranchised by this election, who don't feel that he's their President yet." On ABC, George Stephanopoulos warned Bush to avoid conservative policies: "With a 50-50 Senate and a tiny margin in the House, and a majority in the country who actually voted against President Bush, he'll be able to fulfill that central promise of unifying the country only if he's willing to compromise."

# 2005. Bush's second inaugural was met with far more hostility, with reporters attacking the $40 million price tag as obscene. "In a time of war and natural disaster, is it time for a lavish celebration?" ABC's Terry Moran doubted. The AP's Will Lester calculated that the money spent on Bush's inaugural could vaccinate "22 million children in regions devastated by the tsunami....Do we need to spend this money on what seems so extravagant?" (Obama's inaugural will cost $45 million.)

The day before Bush's swearing-in, ABC's Web site pleaded for tips of "any military funerals for Iraq war casualties scheduled for Thursday, Jan. 20." Sure enough, then-ABC anchor Peter Jennings got his wish to report how "just about the time the president was speaking, there was a funeral for a young Marine reservist: 21-year-old Matthew Holloway was killed in Iraq last week by a roadside bomb." Don't look for the networks to use such tactics to sour Obama's celebration.


h/t: No media mudballs this time, by Paul MirengoffPowerLine Blog, January 16, 2009 at 11:52 AM

Martin Luther King, Jr., Federal Holiday, 2009

Martin Luther King, Jr., Federal Holiday, 2009
A Proclamation by the President of the United States of America
Washington, DC, Jan 15, 2009

On the Martin Luther King, Jr., Federal Holiday, we recognize one of history's most consequential advocates for equality and civil rights, and we celebrate his powerful message of justice and hope. Our Nation is better because Dr. King was a man of courage and vision who understood that love and compassion will always triumph over bitterness and hatred.
As Americans, we believe it is self-evident that all men are created equal and that freedom is not a grant of government but a gift from the Author of Life. Dr. King trusted in these beliefs articulated in our founding documents even when our country's practices did not live up to its promises. He roused the conscience of a complacent Nation by drawing attention to the ugliness of discrimination and segregation and by calling on Americans to live up to our guarantee of equality.

Our Nation has seen tremendous progress in redeeming the ideals of America and protecting every person's God-given rights. The historic election of Barack Obama as President of the United States reflects the real advances our Nation has made in the fight against the bigotry that Dr. King opposed. More work remains, though, and we must heed Dr. King's words that "injustice anywhere is a threat to justice everywhere." By continuing to spread his message and demanding that the equal rights he fought for are extended to all people, we can ensure that the dignity of every person is respected and that the hope for a better tomorrow reaches every community throughout the world.

As we observe Dr. King's birthday, we commemorate his leadership and strength of character. We go forward with confidence that if we remain true to our founding principles, our Nation will continue to advance the cause of justice and remain a beacon of hope to people everywhere.

NOW, THEREFORE, I, GEORGE W. BUSH, President of the United States of America, by virtue of the authority vested in me by the Constitution and laws of the United States, do hereby proclaim January 19, 2009, as the Martin Luther King, Jr., Federal Holiday. I encourage all Americans to observe this day with appropriate civic, community, and service programs and activities in honor of Dr. King's life and legacy.

IN WITNESS WHEREOF, I have hereunto set my hand this fifteenth day of January, in the year of our Lord two thousand nine, and of the Independence of the United States of America the two hundred and thirty-third.

GEORGE W. BUSH

U.S. Calls on Guinea Junta to Announce 2009 National Elections

US Calls on Guinea Junta to Announce 2009 National Elections

Press Statement
US State Dept, Sean McCormack, Spokesman
Washington, DC
January 16, 2009

The United States takes note of the Guinean junta's announcement establishing a cabinet of military officers and civilians. The United States calls on the junta to publicly announce a date for presidential and parliamentary elections in 2009 so Guinea’s Independent National Election Commission (CENI) can ensure the electoral process and elections are credible, free, fair, transparent and timely.


2009/066

US State Dept: Call for Iran to End Stoning

Call for Iran to End Stoning

Press Statement
US State Dept, Sean McCormack, Spokesman
Washington, DC
January 16, 2009

The United States joins the international community in expressing concern about the inhumane practice of stoning in the Islamic Republic of Iran. On January 13, an Iranian judiciary spokesman confirmed that two men had been stoned to death for the charge of adultery in the city of Mashhad. This cruel and unusual punishment is an inhumane practice that does not meet the International Covenant on Civil and Political Rights, which Iran has ratified. We call on Iran not only to permanently abolish the practice of stoning, but to offer all defendants fair and transparent trials.

2009/ 065

New Offshore Plan First Step to Putting U.S. on Path to Economic, Energy Security

New Offshore Plan First Step to Putting U.S. on Path to Economic, Energy Security
Institute for Energy Research, January 16, 2009

Washington, DC –The Institute for Energy Research (IER) today applauded the outlines of a new plan for delivering affordable, secure energy resources to the American people, part of a “draft proposed program” prepared by the federal Mineral Management Service (MMS) and designed to set the course for future domestic energy exploration offshore. The new five-year plan contemplates the future exploration of areas previously locked away under layers of outdated, largely duplicative moratoria. The complete plan, according to MMS, will be published in the Federal Register on Jan. 21.

IER president Thomas J. Pyle issued the following statement:

“With the release of this outline today, the federal government is actively positioning itself to confront the failures of the past and take its first meaningful steps toward delivering our country and its people a secure, affordable energy future. As lawmakers on Capitol Hill continue to work on a government-directed, ‘green jobs’ plan to stimulate our economy, today’s announcement presents our country with two very different choices: either we can spend massive amounts of taxpayer money on energy that’s less reliable, less affordable, and less powerful, or we can generate massive new revenues for the taxpayer by producing energy that’s more reliable, much more affordable, and significantly more powerful.

“Today’s news is long overdue, but it hardly could have come at a better time for an economy that’s hemorrhaging jobs, searching for revenue, and in desperate need of a long-term energy strategy. Each one of these crises could be confronted and neutralized if we were to put in motion a serious plan to develop even a portion of America’s abundant offshore energy resources. Today, the outlines of such a plan were finally revealed. It’s now up to the new Congress and incoming administration to see this plan through completion.”


More from IER on the right way to stimulate our economy:

Fact Sheet: The Outer Continental Shelf (OCS): Supplies, Bans, and Natural Seeps
ICF International Study: New Report Finds Producing Off-Limits Energy Would Generate $1.7 Trillion Stimulus and 160,000 New Jobs
IER Study: Green Jobs: Fact or Fiction?

Japanese Defense Ministry eyes developing early warning satellite for missile shield

Ministry eyes developing early warning satellite for missile shield
Kyodo News, Saturday, Jan 17, 2009 @ 06:28 AM JST

TOKYO — The Defense Ministry is considering developing an early warning satellite to detect a ballistic missile in its boost phase to better deal with threats under Japan’s missile shield, according to the ministry’s basic policy on space development and use released Friday. The development of a man-made orbiter, if realized, would be the first step toward Japan having a satellite-based missile detection system of its own.

Japan currently relies on the United States for information on ballistic missile launches, such as those undertaken by North Korea. The early warning satellite would be designed to detect the heat released by a ballistic missile during its boost phase using infrared sensors, providing Tokyo with more time to respond. The development of such a satellite is likely to face many hurdles, however, not only due to technical problems and the huge costs involved but also because of the potential reaction of the United States, Japan’s closest ally.

Friday, January 16, 2009

Considerations On A Credit Default Swaps Clearinghouse

The Clearinghouse Cure. By Craig Pirrong
Regulation, Vol. 31, No. 4, Winter 2008-2009

Credit Default Swaps (CDSs) are casting an enormous shadow over the world’s crisis-plagued financial markets — as in $50 trillion-plus enormous (although the exact meaning of this oft-quoted figure is somewhat contentious). CDSs were not the source of the ongoing financial crisis (that dubious honor largely goes to complex collateralized debt obligations backed by home mortgages, especially subprime mortgages), but financial markets are filled with fear that a default by a large CDS trader would rip through the financial system, causing a cascade of defaults by other firms. The Federal Reserve and the Treasury Department have responded by bailing out big, financially troubled swaps dealers, including Bear Stearns and AIG, that had large CDS positions, and regret their decision not to bail out another large dealer, Lehman Brothers.

The dread prospect that massive defaults on CDSs could crater the world financial system has led to numerous calls for CDS market reform and regulation. Regulators on both sides of the Atlantic and many market participants have seized on the idea of a clearinghouse for these contracts as the way to make the market more secure and protect the broader banking and capital markets from the prospect of CDS contagion.

The Federal Reserve Bank of New York has held numerous meetings with major market participants and has put substantial pressure on them to create a CDS clearinghouse. Five exchanges have presented proposals to this effect. In Europe, European commissioner for the Internal Market Charlie McCreevy has publicly called for the formation of a clearinghouse to mitigate risks in the CDS market.

Advocates of clearing of “over-the-counter” derivatives (that is, derivatives that are not listed on exchanges) like CDS contracts have pointed out many virtues of central clearing and pointed to the longstanding importance of clearinghouses in organized futures markets. Those advantages cannot be gainsaid, but the testimonials beg an important question: If the benefits of centralized clearing are so great, why haven’t CDS market participants embraced the concept before now, and then only under regulatory pressure? Consideration of this question, and a serious analysis of the economics of clearing as applied to CDSs and other exotic products, demonstrate that these products and, perhaps more importantly, the kind of firms that trade them pose grave challenges to centralized clearing. As a result, clearing CDS products is likely far costlier than clearing “vanilla” instruments such as exchangetraded futures contracts. The additional costs can make it uneconomic to utilize central clearing.

Put differently, clearing is not a one-size-fits-all proposition, because not all derivatives are alike. In particular, an institution that works well for standardized products traded on liquid markets by relatively simple financial intermediaries works much less well for more heterogeneous products traded in relatively illiquid markets by complex financial firms.

This conclusion follows from a consideration of the economics of risk sharing and insurance. Central clearing is essentially a risk-sharing — an insurance — arrangement. The members of the clearinghouse share the costs when another member defaults on its obligations. Sharing risks is often economically efficient, but the costs and benefits of risk sharing depend crucially on informational considerations. To ensure an efficient allocation of risks, and to ensure that the insured face proper incentives to control risks, it is essential to price the insurance correctly. Incorrect pricing can induce the insured to take on too much (or too little) risk.

Pricing insurance properly depends crucially on information. In particular, pricing is particularly difficult when information about risks is asymmetric, especially when the insured have better information that the insurer. This can lead to adverse selection and moral hazard problems. Those problems create real costs that reduce the benefits of risk sharing. Moreover, if those problems are not appropriately addressed in pricing, the insurance mechanism can create perverse incentives that can lead to financial disasters; the savings-and-loan crisis of the 1970s and 1980s was in large part caused by inefficient pricing of deposit insurance.

The complexity of CDS contracts and the financial firms that trade them give rise to potentially severe asymmetric information problems, problems that are more severe than for standardized futures products. Participants in the CDS market and other over-the-counter derivatives markets recognize those problems and have taken measures to mitigate them in their bilateral dealings. A comparative analysis suggests that those measures may well be more efficient than sharing default risks through a clearinghouse. Hence, it is certainly plausible that the absence of a CDS clearinghouse heretofore reflects an efficient market outcome, and that a hasty imposition of a clearinghouse could actually be inefficient.

Moreover, it is by no means clear that the formation of a clearinghouse will internalize externalities that are the source of systemic risks. Systemic risks plausibly arise because large financial firms do not take into account the effect that their failure has on the stability of the financial markets and the efficient operation of the payments system. A clearinghouse does not internalize that externality.

The nature of this analysis is inherently qualitative. It is difficult for anyone, be they academics, market participants, or regulators, to determine definitively whether a clearinghouse would improve the efficiency of the CDS market. I certainly do not claim to possess such definitive knowledge. It is troubling, however, that basic considerations relating to the economics of risk sharing and information have been almost completely absent in the public discourse over CDS clearinghouses. It is also troubling that the potential pitfalls have not been fully aired. Nor has there been an extensive comparative analysis of alternative risk-sharing mechanisms. Therefore, at the very least, this article aims to raise the quality of the debate by identifying crucial issues that have been largely ignored until now, and to challenge a consensus that threatens to engineer a fundamental transformation of the financial markets without proper regard for fundamental economic issues. Moreover, the considerations identified herein should be kept in mind when designing a CDS clearinghouse to ensure that information problems do not make this prescription worse than the disease it is intended to cure.

Full text at Cato's site

Craig Pirrong is professor of finance in the Bauer College of Business at the Universityof Houston.

Al From: Safeguards needed for stimulus

Safeguards needed for stimulus, by Al From
Politico, January 14, 2009 03:43 PM EST

The size of the stimulus package seems to grow with each day’s headlines — it could total nearly $1 trillion before Congress finishes with it.

That’s why designing the stimulus carefully and overseeing its spending with vigilance should be a top priority of the next president and his economic team.

With the stock market and the economy in near collapse, unemployment rising, consumers not spending, lenders not giving credit, and state and local governments contemplating massive cutbacks, there’s good reason for alarm. Not surprisingly, there’s not much concern — nor should there be — about the deficit this year, even as we talk of spending federal dollars in amounts that would have been unimaginable even a few months ago, with the potential for a deficit of as much as $2 trillion next year.

The deficit may not matter in the short run, but the economy will recover, and the size of the deficit will matter again. So even as we pour money into the stimulus, we need to avoid unnecessary waste and keep the long-term fiscal health of the nation in mind.

The hope, of course, is that a massive infusion of federal dollars will jump-start the recovery — and smart investments in infrastructure, health care, technology and energy will build a strong foundation for long-term sustained economic growth and prosperity.

Here are three ideas that would increase the prospects of those outcomes.

First, we should create a National Infrastructure Bank to ensure that infrastructure investment is made wisely, with the long-term growth of the economy in mind. There’s always a great desire to get the money out quickly through “shovel ready” projects that the states have ready to go. To be sure, some worthy projects can quickly provide work for many people. But history should tell us that infrastructure spending is seldom fast — most projects take months or longer to start and years to complete. So it’s critical that the projects have a lasting positive effect on the long-term health of the private economy.

President-elect Barack Obama got it right in his recent interview on “Meet the Press”: “The key for us is making sure that we jump-start the economy in a way that doesn’t just deal with the short term, doesn’t just create jobs immediately, but also puts us on a glide path for long-term, sustainable economic growth.” Unfortunately, with the natural desire of Congress to spread the projects around, it’s a short distance from sound infrastructure investments to pork barrel spending and bridges to nowhere. A National Infrastructure Bank could be essential to spending the infrastructure money in the interest of the country’s long-term economic health.

Second, we need a new version of anti-recession aid to help states and local governments avoid layoffs of key employees such as police officers and firefighters and cutbacks in key services. Such countercyclical aid would complement infrastructure spending. While the infrastructure investments slowly work their way through the pipeline, the counter­cyclical funds would get into the economy immediately and help state and local governments avoid budget catastrophes. To ensure these funds are not wasted or do not continue after the recession is over, this anti-recession — or countercyclical — revenue-sharing program should have a national trigger so that it shuts off when the recession ends and should be carefully targeted to jurisdictions that are in the most distress.

Third, even as we move quickly to stimulate the economy, we should increase our vigilance over the federal budget. The best way to do that would be to establish a new Sunset Commission, with a mission of rooting out wasteful and outmoded government spending and unproductive tax subsidies. Similar to the Base Realignment and Closure Commission, the Sunset Commission would be charged with annually recommending to Congress expenditures or tax subsidies that could be curbed or eliminated. Congress would then have an up or down vote on the commission’s recommendations. So even as the deficit necessarily increases as the stimulus dollars are doled out, we will eliminate unnecessary and wasteful spending that would only add to the deficit in the long run.

These three steps will help get maximum benefits from the stimulus program. For in the end, the success of the stimulus will be determined not by the number of jobs it creates directly through federal projects but rather by whether it leads to long-term private-sector growth and job creation. The president-elect’s goals for the stimulus are quite modest — creating or saving 3 million jobs over the next four years. For America to prosper, our private economy must create several times that number, and a successful stimulus program can set the foundation for that.

Al From is founder and CEO of the Democratic Leadership Council.

US and China Sign Agreement to Protect Archaeological Heritage of China

United States and China Sign Agreement to Protect Archaeological Heritage of China

Media Note
US State Dept, Office of the Spokesman
Washington, DC
January 16, 2009

On ­­­­­­­January 14, the United States and China signed a Memorandum of Understanding Between The Government of The United States of America and The Government of The People’s Republic of China Concerning The Imposition of Import Restrictions on Categories of Archaeological Material from The Paleolithic Period Through The Tang Dynasty and Monumental Sculpture and Wall Art at Least 250 Years Old. Assistant Secretary of State for Educational and Cultural Affairs Goli Ameri and Chinese Ambassador Zhou Wenzhong signed for their respective countries.

Signed on the occasion of the 30th anniversary of diplomatic relations between the United States and China, the agreement establishes a means of cooperation to reduce the incentive for archaeological pillage and illicit trafficking in cultural objects that threaten China’s ancient heritage. The agreement also aims to further the international interchange of such materials for cultural, educational, and scientific purposes. To that end, China has agreed to promote long-term loans of archaeological objects to American museums. The two countries, both already signatories to the UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property, entered into the agreement following a request submitted to the U.S. Department of State by the Chinese Government for assistance under the Convention. The agreement is consistent with the recommendation of the Cultural Property Advisory Committee.

Assistant Secretary Ameri noted that the Chinese people are justly proud of their significant and unique heritage, which has enriched the development of humanity. The discovery of a flute carved from wing bone of a crane shows that humans were making music in China 9,000 years ago. Deputy Assistant Secretary of State for China John Norris noted that the agreement represents one of the many broad areas of cooperation that have expanded between the United States and China during the past three decades.

Following the signing of the agreement, the Department of Homeland Security published in the Federal Register on January 16 a list of the types of archaeological material that now require appropriate documentation to be brought into the United States. The restricted material includes objects generally associated with the Paleolithic and Neolithic periods, Erlitou Culture, and the Shang through Tang Dynasties ranging in date from approximately 75,000 B.C. to A.D. 907. The restrictions also cover monumental and wall art 250 years or older. The list is available at culturalheritage.state.gov/ch2009DLFRN.pdf.

For more information, visit culturalheritage.state.gov or contact Catherine Stearns, Bureau of Educational and Cultural Affairs, U.S. Department of State [...].

2009/062

Cato: Tips for Blocking Socialized Medicine

Tips for Blocking Socialized Medicine. By Michael F. Cannon
Cato Blog, Jan 16, 2009

Prominent health economist Victor Fuchs has an article in this week’s New England Journal of Medicine that all who care about freedom and health care reform should read. He discusses the array of forces that could be — and in my view, should be — employed to stop health care reform this year:

First, many organizations and individuals prefer the status quo. This category includes health insurance companies; manufacturers of drugs, medical devices, and medical equipment; companies that employ mostly young, healthy workers and therefore have lower health care costs than they would if required to help subsidize care for the poor and the sick; high-income employees, whose health insurance is heavily subsidized through a tax exemption for the portion of their compensation spent on health insurance; business leaders and others who are ideologically opposed to a larger role of government; highly paid physicians in some surgical and medical specialties; and workers who mistakenly believe that their employment-based insurance is a gift from their employer rather than an offset to their potential take-home pay. These individuals and organizations do not account for a majority of voters, but they probably have disproportionate influence on public policy, especially when their task is simply to block change.

Second, as Niccoló Machiavelli presciently wrote in 1513, “There is nothing more difficult to manage, more dubious to accomplish, nor more doubtful of success . . . than to initiate a new order of things. The reformer has enemies in all those who profit from the old order and only lukewarm defenders in all those who would profit from the new order.” This keenly observed dynamic, known as the “Law of Reform,” suggests that a determined and concentrated minority fighting to preserve the status quo has a considerable advantage over a more diffuse majority who favor reform but have varying degrees of willingness to fight for a promised but uncertain benefit.

Third, our country’s political system renders Machiavelli’s Law of Reform particularly relevant in the United States, where many potential “choke points” offer opportunities to stifle change. The problem starts in the primary elections in so-called safe congressional districts, where special-interest money can exert a great deal of influence because of low voter turnout. The fact that Congress has two houses increases the difficulty of passing complex legislation, especially when several committees may claim jurisdiction over portions of a bill. Also, a supermajority of 60% may be needed to force a vote in the filibuster-prone Senate.

Fourth, reformers have failed to unite behind a single approach. Disagreement among reformers has been a major obstacle to substantial reform since early in the last century. According to historian Daniel Hirshfield, “Some saw health insurance primarily as an educational and public health measure, while others argued that it was an economic device to precipitate a needed reorganization of medical practice. . . . Some saw it as a device to save money for all concerned, while others felt sure that it would increase expenditures significantly.” These differences in objectives persist to this day.


That last item speaks to a divide among left-leaning health care reformers that was discussed by Drew Altman in a column at the Kaiser Family Foundation web site:

We could be headed for a new schism in the debate about health reform. Not the
familiar gulf between advocates of the market and government, or the predictable one between deficit hawks and spenders, but a new one that crosses traditional partisan and ideological lines between advocates of long-term reform of the health care delivery system, and immediate help for the uninsured and insured struggling with health care costs. This new rift is most likely to develop if tight money and a crowded agenda force the focus to shift from comprehensive to incremental reform and choices need to be made about what goes into a smaller, cheaper legislative package. It’s a rift that could stand in the way of progress on health reform if care is not taken to avoid it.

For one group, I will call them the “Delivery System Reformers,” true health reform lies in making the actual delivery of care more cost effective over the long term. Delivery System Reformers champion health IT, comparative effectiveness research, practice guidelines, and payment incentives to encourage more cost-effective care such as pay for performance . . . . Indeed some delivery reformers believe it would be a mistake to put more money into the current system through expanded coverage until more fundamental changes in the system are made.

The other group, I will call them the “Financing Reformers,” is focused on an entirely different set of problems. Its major concern is the problem of the 46 million Americans without health insurance coverage and the serious problems all Americans are having today paying for health care and health insurance . . . .

The health reform field is like a Venn diagram with circles that intersect (though not by a lot).


As an example of those conflicting priorities, Fuchs himself writes, “If the current health care reform initiative is limited to questions of coverage, without serious attention to cost control and coordination of care, the ‘crisis’ in health care will continue to plague us for years to come.” (Almost sounds like something a member of the Anti-Universal Coverage Club would say.) I would add that conflicts between delivery-system reforms and financing reforms (e.g., covering the uninsured) only arise when dealing with command-and-control approaches to reform.

Neither Fuchs nor Altman intended their articles to be used as a guide to block health care reform. But since Messrs. Obama, Baucus, Daschle, and Wyden have already given us a fairly clear picture of the shape their proposed reforms will take, free-market advocates should scour both articles in their entirety for useful tips on how to beat back the next great leap toward socialized medicine.

Mexico: unilaterally reducing tariff rates

Laudable Economic Stimulus Plan in Mexico, by Daniel Ikenson
Cato Blog, January 15, 2009 @ 11:39 am

While the United States and many other countries flirt with the idea of raising barriers to trade, our enlightened neighbor to the south has a more promising response to the global economic contraction.

On January 2, the Calderon administration initiated a plan (discussed here; HT to Scott Lincicome) to unilaterally reduce tariff rates on about 70 percent of the items on its tariff schedule. Those 8,000 items comprising 20 different industrial sectors accounted for about half of all Mexican import value in 2007. When the final phase of the plan is implemented on January 1, 2013, the average industrial tariff rate in Mexico will have fallen from 10.4% to 4.3%.

The objectives of the plan are to reduce business operating costs, attract and retain foreign investment, raise business productivity, and provide consumers a greater variety and better quality of goods and services at competitive prices. Perhaps our free trade advocacy is having a positive impact on public policy after all. I suspect those objectives are very well served by the plan.

Mexico is no stranger to unilateral trade liberalization—so they’re not just grasping at straws here. This is a tried and true approach to economic growth in Mexico and throughout the world. Many of the reforms Mexico agreed to in the North American Free Trade Agreement were already undertaken before the NAFTA went into effect in 1994. They were undertaken with the same objectives in mind. So, Mexico has some experience and credibility on the issue of the benefits of unilateral trade liberalization.

Let’s hope the rest of the world is watching, if not waiting in the wings.

Martin Luther King III, US Rep. John Lewis, and Herbie Hancock to Lead US State Dept Commemoration of Martin Luther King's 1959 India Journey

Martin Luther King III, U.S. Representative John Lewis, and Herbie Hancock to Lead U.S. Department of State Commemoration of the Rev. Dr. Martin Luther King's 1959 India Journey

Media Note
US State Dept, Office of the Spokesman
Washington, DC, Jan 16, 2009

The U.S. Department of State will support February 2009 celebrations in India to commemorate the tour by the Rev. Dr. Martin Luther King, Jr. 50 years ago to study Mahatma Gandhi. This tour deeply influenced the American civil rights movement. The delegation, including Martin Luther King, III; civil rights movement veteran U.S. Representative John Lewis; and legendary jazz musician Herbie Hancock, along with other distinguished Americans, will meet with counterparts in India to underscore the enduring importance of the King and Gandhi legacies.

The delegation will meet in New Delhi with government leaders, social activists, and youth, and will travel around India to some of the principal sites associated with Mahatma Gandhi’s work. There will be two special musical performances featuring Herbie Hancock and others organized by the Thelonious Monk Institute of Jazz. In Chennai, Indian musicians will conduct a special tribute, including performances of music on the theme of non-violence created by leading composer A.R. Rahman, widely acclaimed for writing the score to the current hit film “Slumdog Millionaire,” and a dramatic reading by film actor and director Kamal Haasan.

In February 1959, Dr. King and Coretta Scott King traveled throughout India in search of the roots of the nonviolent social action movement for Indian independence, studying Mahatma Gandhi’s ideals and meeting his followers around the country. Upon their return to the United States, Dr. King and other leaders of the civil rights movement drew on Gandhi’s ideas to transform American society.

2009/058

Cato: Why Congress Should Turn Federal Lands into Fiduciary Trusts

A Matter of Trust: Why Congress Should Turn Federal Lands into Fiduciary Trusts. By Randal O'Toole
Cato, January 15, 2009
Policy Analysis no. 630

The Forest Service, Bureau of Land Management, National Park Service, and Fish and Wildlife Service collectively manage well over a quarter of the land in the United States. Although everyone agrees that the lands and resources managed by these agencies are exceedingly valuable, the lands collectively cost taxpayers around $7 billion per year.

Several Cato Institute studies have called for privatization of the public lands, but this idea is strongly resisted by environmentalists, recreationists, and other users of public land. An alternative policy that will both enhance the values sought by environmentalists and improve the fiscal management of the lands is to turn them into fiduciary trusts. Under this proposal, the U.S. would retain title to the lands, but the rules under which they would be governed would be very different.

Fiduciary trusts are based on hundreds of years of British and American common law that ensures that trustees preserve and protect the value of the resources they manage, keep them productive, and disclose the full costs and benefits of their management. For trust law to apply, public land trusts must be based on a law written by Congress that clearly defines the trustees, the beneficiaries, and a specific mission or missions for the trusts.

Congress should create two types of trusts. Market trusts would have a mission of maximizing revenue while preserving the productive capacity of the land. To achieve this mission, Congress should allow them to charge fair market value for all resources. Nonmarket trusts would have a mission of maximizing the preservation and, as appropriate, restoration of natural ecosystems and cultural resources on the public lands.

Each pair of market and nonmarket trusts would jointly manage all federal lands in one of about a hundred ecoregions. Each ecoregion would have about 5 to 10 million acres of federal land that might include forests, parks, refuges, and other public lands. Trustees would be elected by a friends' association that anyone would be welcome to join. Trusts would be funded out of the user fees they collect, with some retained by the market trust and some given to the nonmarket trust. In some cases, excess user fees would be returned to the U.S. Treasury.

The trust idea would significantly improve both fiscal and environmental management of the public lands. Congress should begin to implement this idea by testing it on selected national forests, parks, and other federal lands

Full text here

PPI: Recommendation for Electronic Health Records and Patient Privacy Protection in the Stimulus Bill

Recommendation for Electronic Health Records and Patient Privacy Protection in the Stimulus Bill
Progressive Policy Institute, January 15, 2009

Dear Members of the House and Senate:

As you consider investments in health information technology in the American Recovery and Reinvestment Act of 2009, we urge you to use the standards and priorities described below. These expenditures should be tied as much as possible to the development of systems that can successfully support the improvements in the quality and efficiency of health care we all desire. We have two key goals: (1) around the clock availability of a comprehensive and secure electronic health record (EHR) for each patient and his or her health care professionals and (2) protection of each patient's privacy through informed consent, transparency in the uses of each patient's information, and the development of ways for patients to implement their privacy preferences.

The standards we suggest will enable third party organizations to act on behalf of patients to assemble a comprehensive version of their records. Patients will control a comprehensive copy of their own medical record data and also have control over who has access to which portions of that copy. Patients can also use the information in their records for prevention and wellness. They can give health care professionals and third parties access to a comprehensive compilation of their records, or if the patient prefers, the minimally necessary information for a specific use.

The types of third parties that can give patients access to a comprehensive EHR are health record banks and trusts, personal health record vendors, health plans, and regional health information organizations, all of which are players in the field known as health information exchange. Patients would voluntarily choose to utilize one of these organizations based on their services. All of these organizations have a stake in reducing the barriers to patient acceptance and provider adoption of electronic health records because they succeed when more data is shared electronically. Additional public assistance will likely be needed, however, to help disabled patients, patients with chronic diseases, and patients and providers in underserved and rural areas achieve these same goals. Such assistance could also help reduce disparities in health care outcomes by deploying EHRs to help bridge language and cultural divides.


Standards for Electronic Health Records Funding

By the term EHR, we mean a digital collection of a patient's medical history including items such as diagnosed medical conditions, prescribed medications, vital signs, immunizations, lab results, and personal characteristics like age and weight.

All EHR systems supported with public funds must fulfill a patient's request for an electronic copy of all or part of their medical records, including audit trails and subsequent updates. The copy would be transmitted to the patient or a patient-designated third party. Copies and updates of EHR data must be made available within 24 hours, absent exceptional circumstances, at no charge to patients or third parties, and should be available for sharing only with the informed consent of the patient.

Where the medical record information that the patient requests is textual, the copy must be in human-readable text, formatted at a minimum using either extensible markup language (XML) or PDF with data types and formats that are recommended and maintained by the National Institute of Standards and Technology in consultation with existing standards development organizations (see attachment). Copies of images and other non-textual medical record information would be handled using existing standards.

The specific objective behind this standard for a patient copy of EHR information is to provide patients and, with a patient's explicit consent, the patient's providers, with both human and machine-readable textual representations of his or her comprehensive electronic medical record. Publicly supported EHR systems should also provide a reliable process for authentication of the identity of all their users and an audit trail of all events including all disclosures of a patient's records.

Funding for EHR systems for underserved, safety net providers, and those with disabilities should be a priority, as should funding for organizations to educate underserved, rural populations, and those with disabilities about the use of health information technology and to help them use that technology.


Priorities for Funding Health Information Exchange

Health information exchange (HIE) is the movement of patients' health care information electronically across disparate systems while preserving the meaning of the information.

Funding for organizations that undertake HIE for patients should be prioritized according to how well they can achieve, and over time in fact do achieve, the following goals:
  • The availability to patients and healthcare providers, around the clock, of XML outputs with informed patient consent, from the EHR systems of all the providers to the populations served by the HIE organization. A personal health record is one way for an HIE to provide such availability.
  • The availability to patients of an audit trail that records all events in a patient's compiled HIE-EHR account in an easily understandable and searchable format.
  • Reliable authentication of the identity of all users of the HIE organization;
  • Service by the HIE organization to safety net providers, underserved populations, to those with disabilities; and
  • A sustainable financing model to ensure that it can continue to provide its services to patients and providers alike.
We do not intend these standards and priorities to exclude other considerations in funding a wide variety of possible health information technology initiatives, but rather they are a strategy to achieve a comprehensive electronic health record for patients and to protect their privacy.

We respectfully request that you adopt this recommendation.

Sincerely,

- American Academy of Family Physicians
- American College of Cardiology
- Cerner Corporation
- Greater Ocala Health Information Trust, Inc.
- Health Record Banking Alliance
- Information Technology and Innovation Foundation
- Louisville Health Information Exchange, Inc.
- National Alliance for Hispanic Health
- Patient Command, Inc.- Progressive Policy Institute
- Secure Services Corp.
- Self-Insurance Institute of America

BHO: long-term economic recovery cannot be attained unless the government finally gets control over its most costly entitlement programs

Obama Pledges Entitlement Reform. By Michael D. Shear
President-Elect Says He'll Reshape Social Security, Medicare Programs
Washington Post, Friday, January 16, 2009; page A01

Excerpts:

President-elect Barack Obama pledged yesterday to shape a new Social Security and Medicare "bargain" with the American people, saying that the nation's long-term economic recovery cannot be attained unless the government finally gets control over its most costly entitlement programs.

[...]

"What we have done is kicked this can down the road. We are now at the end of the road and are not in a position to kick it any further," he said. "We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else's."

In a wide-ranging 70-minute interview with Washington Post reporters and editors, the president-elect pledged quick action on the Middle East once he takes office, promised to support voting rights for D.C. residents, and said he will consider it a failure if he has not closed the U.S. military prison at Guantanamo Bay, Cuba, by the end of his first term in office.

[...]

He said that creating jobs and maintaining national security will be his top priorities and added that his efforts as president should be measured by whether the nation can overcome predicted job losses in the months ahead.

"I don't have a crystal ball," Obama said after being asked when the economy might begin to recover. "Nobody can tell." But he added: "Even with the stuff that we are doing, I think we can still anticipate that 2009 is going to be very tough."

Obama vowed to build a new financial regulatory system that inspires clarity and transparency, and endorsed the broad direction offered yesterday by a group led by former Federal Reserve chairman Paul A. Volcker, an adviser to the incoming president.

The president-elect also gave his support for legislation that would make it easier for workers to unionize, but he said there may be other ways to achieve the same goal without angering businesses. [...]

"If we're losing half a million jobs a month, then there are no jobs to unionize, so my focus first is on those key economic priority items I just mentioned," he said. "Let's see what the legislative docket looks like."

Obama repeated his assurance that there is "near-unanimity" among economists that government spending will help restore jobs in the short term, adding that some estimates of necessary stimulus now reach $1.3 trillion.

The president-elect said he believes that direct government spending provides the most "bang for the buck" and that his advisers have worked to design tax cuts that would be most likely to spur consumer and business spending.

But he framed the economic recovery efforts more broadly, saying it is impossible to separate the country's financial ills from the long-term need to rein in health-care costs, stabilize Social Security and prevent the Medicare program from bankrupting the government.

"This, by the way, is where there are going to be very difficult choices and issues of sacrifice and responsibility and duty," he said. "You have to have a president who is willing to spend some political capital on this. And I intend to spend some."

Obama is not the first incoming president to make bold declarations about overhauling the nation's retirement and health-care systems. Both Bill Clinton and George W. Bush made similar vows.

Clinton's push for universal health care -- led by his wife, Hillary Rodham Clinton -- collapsed under opposition from insurance companies and leaders on Capitol Hill. In 1993, Clinton appointed a commission on Medicare and Social Security headed by then-Sens. Bob Kerrey (D-Neb.) and John Danforth (R-Mo.), but never implemented its ambitious recommendations.
Bush made Social Security reform a centerpiece of his domestic agenda in his second term and, like Obama, pledged to expend political capital on the issue. He recently cited his failed push to allow some younger workers to invest their Social Security money in the stock market as one of the regrets of his presidency.

Five days before taking office, Obama was careful not to outline specific fixes for Social Security and Medicare, refusing to endorse either a new blue-ribbon commission or the concept of submitting an overhaul plan to Congress that would be subject only to an up-or-down vote, similar to the one used to reach agreement on the closure of military bases.

But the president-elect exuded confidence that his economic team will succeed where others have not.

"Social Security, we can solve," he said, waving his left hand. "The big problem is Medicare, which is unsustainable. . . . We can't solve Medicare in isolation from the broader problems of the health-care system."

Medicare, the government health program for retirees and the disabled, is projected to be insolvent by 2019, according to the most recent report by the Social Security and Medicare trustees. Over the next two decades, Medicare spending is expected to double, consuming nearly one-quarter of the federal budget.

Beginning in 2011, Social Security will take in less revenue than it pays out and will be forced to dip into reserves to pay benefits. It is projected to deplete its reserves by 2041, according to the trustees.

"The longer action is delayed, the greater will be the required adjustments, the larger the burden on future generations, and the more severe the detrimental economic impact on our nation," the trustees wrote last year.

In 2007, Medicare spending consumed 3.2 percent of gross domestic product, while Social Security represented 4 percent of GDP.

Obama's call for a financial summit is in part a response to a growing anxiety in Congress, where members are being asked to approve an unprecedented amount of federal spending at a breakneck pace. Aides said it was modeled after a summit Clinton held in 1995 to discuss reforming welfare.

The president-elect has been in frequent conversation with lawmakers, including House Majority Leader Steny H. Hoyer (D-Md.) and the Blue Dog Coalition of fiscally conservative Democrats, who repeatedly told Obama they would be willing to support his stimulus package only if he pledged not to lose sight of the larger budget picture. Those who will be invited to attend the summit include the Blue Dogs, Senate Budget Chairman Kent Conrad (N.D.), ranking minority member Judd Gregg (N.H.) and a host of outside groups with expertise on the topics, the president-elect said.

Obama said he is confident that he can find a way to close the Guantanamo Bay prison while finding a way to deal with and house potentially dangerous detainees. Sources said an executive order will lay out a procedure for closing the facility, but strongly disputed reports that such an order will come on the first day of the new administration.

On Israel, Obama again declined to comment on the violence in the Gaza Strip, repeating his mantra that the United States should have only "one president at a time" when it comes to foreign policy matters. But he promised early engagement on peace in the Middle East.

"I know some people have said, 'You have this big economic crisis on your hands, and so President Obama is going to just put off issues like this until his second term or later in his first term,' " he said. "I don't think we have that luxury."

He added: "That doesn't mean that we close a deal or we have some big grand, you know, Camp David-type event early in my administration. It does mean that we have a team in place which is hitting the ground and starting to engage constructively."

Obama reacted to questions about the emerging structure of his White House by displaying confidence in his ability to manage people. He has begun assembling a powerful team of White House counselors who will compete with Cabinet secretaries for influence over the majority of domestic and foreign policy issues.

"The theory behind it is I set the tone," Obama said. "If the tone I set is that we bring as much intellectual firepower to a problem, that people act respectfully towards each other, that disagreements are fully aired, and that we make decisions based on facts and evidence as opposed to ideology, that people will adapt to that culture and we'll be able to move together effectively as a team."
He added: "I have a pretty good track record at doing that."

Staff writers Ceci Connolly and Lori Montgomery contributed to this report.

Washington Post: Pragmatist-in-Chief

Pragmatist-in-Chief. Washington Post Editorial
Barack Obama offers some reassuring signals about his coming presidency in a visit to The Post.
Washington Post, Friday, January 16, 2009; page A18

PRESIDENT-ELECT Barack Obama came to The Post editorial board yesterday with two messages sketchy on details yet reassuring in approach: a commitment to fiscal discipline, and a determination not to be bound by liberal, or indeed any, orthodoxy.

On the first, Mr. Obama announced his plans for a "fiscal responsibility summit" next month, even before his first budget is unveiled, "to send a signal that we are serious" about getting the long-term budget under control. These sorts of events can be window dressing, cosmetic exercises to talk about hard choices rather than make them. Yet Mr. Obama deserves the benefit of the doubt when he says that, once an economic recovery is underway, "we've got to bend the curve" of rising spending and get entitlement costs under control.

"There are going to be some very difficult choices, and issues of sacrifice and duty and responsibility are going to come in because what we have done is kick this can down the road," he said. "We are now at the end of the road and are not in a position to kick it any further." Mr. Obama declined to tip his hand about what sacrifices he envisioned, but he said a commission to make recommendations on entitlement spending that would then go to Congress for an up-or-down vote is "something worth talking about."

In any event, he said, "Whether there was a commission or not, you have to have a president who is willing to spend some political capital on this, and I intend to spend some." We look forward to that.

On the Employee Free Choice Act, which would allow unions to organize by obtaining a majority of signatures from employees in a workplace rather than having to win secret-ballot elections, Mr. Obama signaled willingness to consider other mechanisms to address the concern that employers unfairly use the current process to intimidate workers not to join unions. And he seemed in no hurry to have Congress bring it up. "If we're losing half a million jobs a month, then there are no jobs to unionize, so my focus first is on those key economic priority items," Mr. Obama said, declining to state whether he wanted to see the issue debated during his first year in office.

Asked about whether the legal system is adequate for detaining and trying alleged terrorists, Mr. Obama said that he is undecided about whether some kind of special national security courts might be needed. "I am confident that we can set up a structure," he said. "I haven't prejudged whether it's through a traditional federal court system, is it through military courts-martial, is it through some variant. I am confident that core principles of due process, habeas corpus and so forth can be put in place that insures we are prosecuting bad guys much more rapidly than we have up until now, that we are true to the Geneva Conventions and international norms, that we are true to our Constitution and that [we] keep the American people safe."

Discussing the impression that his personnel selections have indicated a centrist bent, Mr. Obama argued against such pigeonholing. "What we're trying to eliminate is thinking through that lens," he said, citing the example of his choice for education secretary, Arne Duncan. "He . . . believes that we have to have really high standards and that the status quo is unacceptable and that as a way of achieving excellence we've got to break out of some of the old dogmas," Mr. Obama said. "Is he left or right? I don't know. He's smart, and he agrees with my general assessment of where the school systems are. That's why I hired him, not because of what one wing of the education establishment or another wing thought of him."

Mr. Obama's indications of ideological flexibility are rather abstract at this point; he has not yet been called on to make the kind of difficult choices about which he speaks so eloquently. But his transition has sounded all the right themes, and, if yesterday's session is any guide, his presidency promises to begin on the same hopeful, pragmatic note.

"Shipping Jobs Overseas" or Reaching New Customers? Why Congress Should Not Tax Reinvested Earnings Abroad

"Shipping Jobs Overseas" or Reaching New Customers? Why Congress Should Not Tax Reinvested Earnings Abroad. By Daniel T. Griswold
Cato, Free Trade Bulletin No. 36, Jan 13, 2009

Trade and globalization have become more inviting targets during the current economic downturn. As output falls and unemployment rises, politicians in Washington are questioning not only imports but U.S. companies that invest in production abroad.

The incoming president, Barack Obama, pledged during his campaign that, "Unlike John McCain, I will stop giving tax breaks to corporations that ship jobs overseas and I will start giving them to companies that create good jobs right here in America."1 That campaign refrain, echoed by a number of other successful candidates, raises three basic questions:

Why do U.S. multinational companies establish affiliates abroad and hire foreign workers? What kind of tax breaks are they receiving? And should the new Congress and new president change U.S. law to make it more difficult for U.S. multinational corporations to produce goods and services in foreign countries?


Reaching millions of new customers

To demonize U.S. multinationals operating production facilities abroad is to indict virtually every major American company. At latest count more than 2,500 U.S. corporations own and operate a total of 23,853 affiliates in other countries. In 2006, according to the U.S. Department of Commerce, majority-owned foreign affiliates of U.S. companies posted $4.1 trillion in sales, created just under $1 trillion in value added, employed 9.5 million foreign workers, and earned $644 billion in net income for their U.S.-based parent companies.2

The primary reason why U.S. companies invest in affiliates abroad is to sell more products to foreign customers. Certain services can only be delivered on the spot, where the provider must have a physical presence in the same location as its customers. Operating affiliates abroad allows U.S. companies to maintain control over their brand name and intellectual property such as trademarks, patents, and engineering expertise. U.S. companies also establish foreign affiliates because of certain advantages in the host country— lower-cost labor, ready access to raw materials and other inputs, reduced transportation costs and proximity to their ultimate customers. Yes, the motivations can include access to "cheap labor," but labor costs are not the principal motivation for most U.S. direct investment abroad.

Politicians focus most of their attention on comparing exports and imports, but the most common way American companies sell their goods and services in the global market today is through overseas affiliates. In 2006, U.S. multinational companies sold $3,301 billion in goods through their majority-owned affiliates abroad and $677 billion in services. For every $1 billion in goods that U.S. multinational companies exported from the United States in 2006, those same companies sold $6.2 billion through their overseas operations. For every $1 billion in service exports, U.S.- owned affiliates abroad sold $1.6 billion.3

Contrary to popular myth, U.S. multinational companies do not use their foreign operations as an "export platform" back to the United States. Close to 90 percent of the goods and services produced by U.S.-owned affiliates abroad are sold to customers either in the host country or exported to consumers in third countries outside the United States. Even in Mexico and China, where low-wage workers are supposedly too poor to buy American products, more than half of the products of new and existing U.S. affiliates are sold in their domestic markets, whereas customers in the United States account for only 17 percent of sales.4


More Jobs Abroad, More Jobs at Home

Investing abroad is not about "shipping jobs overseas." There is no evidence that expanding employment at U.S.- owned affiliates comes at the expense of overall employment by parent companies back home in the United States. In fact, the evidence and experience of U.S. multinational companies points in the opposite direction: foreign and domestic operations tend to compliment each other and expand together. A successful company operating in a favorable business climate will tend to expand employment at both its domestic and overseas operations. More activity and sales abroad often require the hiring of more managers, accountants, lawyers, engineers, and production workers at the parent company.

Consider Caterpillar Inc., the Peoria, Illinois-based company known for making giant earth-moving equipment. From 2005 through 2007, the company enjoyed booming global sales because of strong growth in overseas markets, especially those with resources extracted from the ground. According to the company's 2007 annual report, Caterpillar earned 63 percent of its sales revenue abroad, including $1 billion in sales in China alone. As a result, Caterpillar ramped up employment at its overseas affiliates during that time from 41,238 to 50,788, an increase of almost 10,000 workers. During that same three-year period, the company expanded its domestic employment from 43,878 to 50,545, a healthy increase of 6,667.5

Caterpillar's experience is not unusual for U.S. multinational companies. A 2005 study from the National Bureau of Economic Research found that, during the 1980s and 1990s, there was "a strong positive correlation between domestic and foreign growth rates of multinational firms." After analyzing the operations of U.S. multinational companies at home and abroad, economists Mihir A. Desai, C. Fritz Foley, and James R. Hines Jr. found that a 10 percent increase in capital investment in existing foreign affiliates was associated with a 2.2 percent increase in domestic investment by the same company and a 4 percent increase in compensation for its domestic workforce. They also found a positive connection between foreign and domestic sales, assets, and numbers of employees.6 "Foreign production requires inputs of tangible or intellectual property produced in the home country," the authors explained. "Greater foreign activity spurs higher exports from American parent companies to foreign affiliates and greater domestic R&D spending."7

The positive connection between foreign and domestic employment of U.S. multinational companies has continued into the current decade. As Figure 1 shows, parent and affiliate employment have tracked each other since the early 1980s. More recently, employment rose briskly for parents and affiliates alike in the boom of the late 1990s, fell for both during the downturn and slow recovery of 2001 through 2003, and then rose again from 2003 through 2006.8 Although the numbers have not been reported yet for 2007 and 2008, it's likely that the loss of net jobs in the domestic U.S. economy will be mirrored by much slower growth or outright decline in foreign affiliate employment.


Modest Investment in China and Mexico

Investment in China and Mexico drew the most fire on the campaign trail. In a primary debate in Texas in February 2008, then-senator Obama said, "In Youngstown, Ohio, I've talked to workers who have seen their plants shipped overseas as a consequence of bad trade deals like NAFTA, literally seeing equipment unbolted from the floors of factories and shipped to China."9 That makes for a good sound-bite in the heat of a campaign, but it does not accurately reflect the broader reality of outward foreign investment by U.S. manufacturers.

[graph in original article]


Outflows of U.S. manufacturing investment to Mexico and China have been modest by any measure. Between 2003 and 2007, U.S. manufacturing companies sent an average of $2 billion a year in direct investment to China and $1.9 billion to Mexico. That pales in comparison to the average $22 billion a year in direct manufacturing investment "shipped" to Europe during that same period, but talking about equipment being unbolted from the floors of U.S. factories and shipped to England just doesn't have the same bite.10 The modest annual outflow in investment to China and Mexico is positively dwarfed by the annual $59 billion inflow of manufacturing investment to the United States from abroad during those same years11 and the average of $165 billion per year that U.S. manufacturers invested domestically in plant and equipment.12

The fear of manufacturing jobs being shipped to China and Mexico is not supported by the evidence. While U.S. factories were famously shedding those 3 million net jobs between 2000 and 2006, U.S.-owned manufacturing affiliates abroad increased their employment by a modest 128,000 jobs. An increase in 172,000 jobs at U.S.-owned affiliates in China was partially offset by an actual decline of almost 100,000 jobs at affiliates in Mexico.13 The large majority of factory jobs lost in the United States since 2000 were not "shipped to China" or anywhere else, but were lost to automation and other sources of increased efficiency in U.S. manufacturing.

U.S. manufacturing investment in China remains modest compared to the huge political investment that candidates and pundits have made in making it an issue. U.S. direct investment in China remains a relatively small part of China's overall economy, and a small part of America's total investments abroad. Of the nearly 10 million workers that U.S. affiliates employ abroad, fewer than 5 percent are Chinese; Americanowned affiliates employed just as many manufacturing workers in high-wage Germany in 2006 as they did in low-wage China.14


"Tax breaks" Keep U.S. Companies Competitive

Politicians are not usually specific about exactly what "tax breaks" they want to repeal. The biggest tax exemption for U.S. companies that invest abroad is the deferral of tax payments for "active" income. U.S. corporations are generally liable for tax on their worldwide income, whether it is earned in the United States or abroad. But the relatively high U.S. corporate tax rate is not applied to income earned abroad that is reinvested abroad in productive operations. U.S. multinationals are taxed on foreign income only when they repatriate the earnings to the United States. Not surprisingly, the deferral of active income gives U.S. companies a powerful incentive to reinvest abroad what they earn abroad, but this is hardly an incentive to "ship jobs overseas."

Such deferral may sound like an unjustified tax break to some, but every major industrial country offers at least as favorable treatment of foreign income to their multinational corporations. Indeed, numerous major countries exempt their companies from paying any tax on their foreign business operations. Foreign governments seem to more readily grasp the fact that when corporations have healthy and expanding foreign operations it is good for the parent company and its workers back home.15

If President Obama and other leaders in Washington want to encourage more investment in the United States, they should lower the U.S. corporate tax rate, not seek to extend the high U.S. rate to the overseas activities of U.S. companies. Extending high U.S. tax rates to U.S.-owned affiliates abroad would put U.S. companies at a competitive disadvantage as they try to compete to sell their goods and services abroad. Their French and German competitors in third-country markets would continue to pay the lower corporate tax rates applied by the host country, while U.S. companies would be burdened with paying the higher U.S. rate. The result of repealing tax breaks on foreign earnings would be less investment in foreign markets, lost sales, lower profits, and fewer employment and export opportunities for parent companies back on American soil.

Politicians who disparage investment in foreign operations are wedded to an outdated and misguided economic model that glorifies domestic production for export above all other ways for Americans to engage in the global economy. They would deny Americans access to hundreds of millions of foreign customers and access to lower-cost inputs through global supply chains. In short, they would cripple American companies and their American workers as they try to compete in global markets.

[Full text w/references at the original link above]


Daniel T. Griswold is the director of the Center for Trade Policy Studies at the Cato Institute.